All Forum Posts by: Adam Rasmussen

- The rental activity will show up on the 8825

- If the 1065 is strictly a rental activity partnership then there should be nothing showing up on the first page of the 1065. Everything will be on the 8825

- You don't really need to be too technical with the Improvements classification. "Other Current Assets" should be fine and the description doesn't need to be super technical either. 

- You may want to break them out. Mostly for tax savings. If you have some assets in there with smaller useful lives (appliances, carpet, paint, etc) you could technically expense them 100% in 2020 and the remainder could be depreciated over 27.5. Something to look into. 

As a CPA our favorite new clients are those who used HR Block or Turbo Tax to prepare their prior returns because that means we typically can find something wrong and pay for ourselves right the bat! We amend a good amount of those returns for missed deductions. 

When you find a CPA and they aren't paying for themselves then you should find a new one. 

That isn't really going to fly. If you were to raze the entire building you would still have a piece of land worth something. There are few ways you could split things up. You could check county records to see what their division is. In my experience the county typically puts too much value on land. With my SFH clients I typically do an 80/20 split with 80% going to the building and 20% going to land. With apartment complexes I would argue the building makes up more than 80% of the value, however.

From there I would take that 80% and divide among smaller depreciable assets with shorter lives (carpet, appliances, paving, etc)

As a CPA I am typically inclined to recommend getting a CPA. Especially as a newbie. While things are less complicated you might look into a CPA who is willing to pass off some pointers and maybe down the road you can take it on yourself but I still wouldn't recommend it. 

Fairly vague question but depreciation is really your best bet for getting the most back on your taxes. Make sure all of your expenses are accounted for. Any rehab done, utilities paid, insurance, interest, etc.

I am a little confused how you sold part of a property. Was this a tenant in common situation where you only owned a part of it? 

Either way, it shouldn't be an issue if the same SMLLC owns multiple properties.

@Matt Lord

Definitely some good questions here, Matt.

The "main" benefit is really dependent on what your goals are. From a tax standpoint, people may think that depreciation is the main benefit while others find that 1031 exchanges are the main benefit. 

Building depreciation is very slow where component depreciation is more accelerated. 

Rental income is taxed at your ordinary rates, just like earned income. The benefit of rentals is there are no payroll taxes taken out.

If you are flipping the house, then yes you will be subject to an additional 15% tax (self-employment tax). But if you are renting the houses, then no you will not be subject to that tax. 

There really is no magic formula for eliminating taxes as everyone's situation is drastically different than their neighbor. However, through depreciation you could be cash flowing on your properties but showing a loss on your income taxes. 

I would think a single entity would be best. If you do a construction entity you run the risk of showing self employment income subject to the extra 15% tax. 

@Todd Rasmussen

Good luck! 

Based on what my family tells me we originally came from Norway. Wouldn't know for sure though! 

Non-community property states get a little more complicated. When a spouse passes away I believe the assets receive a 50% step up in basis and when the remaining spouse passes the assets are then stepped up 100% to fair market value because the remaining spouse is now the sole owner of the assets. 

If the beneficiary is the child then I imagine the properties have received the full step up. Definitely worth doing a bit of additional research but should have zero impact on your situation. I imagine you are probably trying to use some tax knowledge to ease their process which would ultimately ease your process. 

S-Corps do have certain tax advantages but only at certain levels. A lot of clients I see would be paying more for our CPA tax prep fee than they would be saving by filing as an S-Corp. 

Just to echo what Natalie had mentioned, always a good idea to get another professional set of eyes on things to get the full picture. But you could also take a look at your return and see if the Schedule C or Schedule E has been filled out. Might answer some questions you may have before incurring another CPA fee.